Home loan Applications for self-employed individuals

Applying for a home loan could be a daunting task if attempted without the assistance of a professional Bond originator, even more so in the case of a self-employed applicant/s according to Elmar Pittendrigh Managing Director of Bond Gallery. This is mainly as a result of the “proof of income” documentation required to prove the income of a self-employed individual opposed to proof of income for salaried applicants.

There are some critical factors to smooth out these challenges that any self-employed could follow and be aware of. It is advisable that these buyers take the time beforehand to familiarise themselves with what is required and the criteria to be met as applications can easily be delayed, or even declined, due to simple omissions or errors.

Pittendrigh says it’s important to ensure that all the required information is included in support of an application submitted to the bank and also that it’s complete without zero omissions and in the format required by the lending institution.

“We often find that self-employed applications are declined as a result of self-employed applicants have asked their bookkeepers, who may not be experienced in home loan applications, to compile their information for them,” says Jovanet Van Der Merwe, Branch Manager of Bond Gallery West Rand. “The best way to avoid such declines and delays is to apply for pre-approval through a bond originator before they even begin searching for a property.”

Van Der Merwe says that application documentation may vary depending on the individual applicant, but in general the following documentation would be required in support of self-employed applications:

– Financials covering a trading or working period of the latest two years.

– A letter from their auditor confirming personal income.

– If financials are more than six months old, the bank will need up-to-date signed management accounts.

– A cash-flow forecast for the ensuing 12 months.

– A personal statement of assets and liabilities.

– Personal and business bank statements.

– Their latest IT34, which is confirmation from SARS that their tax affairs are in order.

– Their company, closed corporation (CC) or trust statutory documents.

– The ID documents of all their business directors, members or trustees.

– Depending on the complexity of their application, it may also be useful to provide a short CV.

Van Der Merwe says it’s important for such applicants to ensure that all financial affairs are well in order before considering an offer on a property.

 “Quite often hold-ups and unsuccessful applications result from self-employed applicants are where financial statements are outdated and not up-to-date management accounts, where personal expenses are not separate from their business expenses, financial and tax affairs are not in order.”

Finally Van Der Merwe adds: “We have not come this far only to come THIS far….. The additional criteria for self-employed buyers is understandably daunting, however, with the guidance of knowledgeable and experienced property finance specialists and experienced estate agents it’s possible to circumvent most of the above challenges.

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